FX Forward Market in Hungary: General Characteristics and Impact of the COVID Crisis

Anna Boldizsár (), Zalan Kocsis, Zsuzsa Kékesi and Gábor Sztanó ()
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Anna Boldizsár: Magyar Nemzeti Bank
Gábor Sztanó: Magyar Nemzeti Bank

Financial and Economic Review, 2020, vol. 19, issue 3, 5-51

Abstract: Our study investigates the basic characteristics, structure and time trends of the Hungarian FX forward market. We demonstrate that, in addition to non-financial firms active in international trade, mutual funds have become key actors in this market. Hedging and speculative motives – based on expectations of EURHUF stability – can be identified in the trading of both sectors. Non-financials are however more sensitive to exchange rate changes than financial actors. Crises, such as the global financial turbulence experienced in March 2020 due to the spread of the coronavirus, are characterised by a decline in speculative trading. During the depreciation of the forint together with regional currencies at the end of March, nonfinancial firms did not increase their net long HUF forward positions, while mutual funds increased their short HUF positions due to precautionary considerations, the depreciation of international assets and liquidity shocks (redemption of mutual fund shares, increasing margin call funding requirements).

Keywords: FX forward market; exchange rate exposure; mutual funds; time-varying parameter model; COVID crisis (search for similar items in EconPapers)
JEL-codes: C32 D84 F31 G32 (search for similar items in EconPapers)
Date: 2020
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